-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OPp78Nei140SHFgSZ3Ax5XKdbRJtQZrsyKBZ/8HMcJm+MHHWT9FjQEr6pwDyFBk9 41degcP1YPf8dbmxVVEqdA== 0000950149-99-001510.txt : 19990817 0000950149-99-001510.hdr.sgml : 19990817 ACCESSION NUMBER: 0000950149-99-001510 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OMNIS TECHNOLOGY CORP CENTRAL INDEX KEY: 0000820738 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 943046892 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-16449 FILM NUMBER: 99693511 BUSINESS ADDRESS: STREET 1: 981 INDUSTRIAL WAY STREET 2: BUILDING B CITY: SAN CARLOS STATE: CA ZIP: 94070-4117 BUSINESS PHONE: 6506327100 MAIL ADDRESS: STREET 1: 989 E HILLSDALE BLVD. #400 CITY: FOSTER CITY STATE: CA ZIP: 94404 FORMER COMPANY: FORMER CONFORMED NAME: BLYTH HOLDINGS INC DATE OF NAME CHANGE: 19920703 10QSB 1 FORM 10-QSB FOR THE PERIOD ENDED JUNE 30, 1999 1 U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (Mark One) [X] Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 FOR THE QUARTER ENDED JUNE 30, 1999 OR [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _________ to _________ Commission File number 0-16449 OMNIS TECHNOLOGY CORPORATION (Exact name of registrant as specified in its charter) Delaware 94-3046892 (State of incorporation) (IRS Employer Identification No.) 981 Industrial Road, Building B San Carlos, CA 94070 (Address of principal executive offices) (650) 632-7100 (Registrant's telephone number) Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes [X] No [ ] As of July 28, 1999 there were 9,682,146 shares of registrant's Common Stock, $.10 par value, outstanding. 2 OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES INDEX PART I. FINANCIAL INFORMATION
Page No. -------- Item 1. Financial Statements: Condensed Consolidated Balance Sheet - June 30, 1999 and March 31, 1999 3 Condensed Consolidated Statements of Operations - Three months ended June 30, 1999 and 1998 4 Condensed Consolidated Statements of Cash Flows - Three months ended June 30, 1999 and 1998 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II. OTHER INFORMATION Item 1. Legal Proceedings 12 Item 2. Changes in Securities 12 Item 3. Defaults upon Senior Securities 12 Item 4. Submission of Matters to a Vote of Security Holders 12 Item 5 Other Information 12 Item 6. Exhibits and Reports on Form 8-K 12 Signatures 13
2 3 PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS June 30, March 31, 1999 1999 ------------ ------------ (Unaudited) Current Assets: Cash and equivalents $ 432,000 $ 271,000 ============ ============ Trade accounts receivable, less allowance for doubtful accounts and returns of $190,295 and $150,049, respectively 786,000 764,000 Inventory 12,000 13,000 Other current assets 335,000 609,000 ------------ ------------ Total current assets 1,565,000 1,657,000 ------------ ------------ Property, furniture and equipment, net 835,000 890,000 Other assets 10,000 10,000 ------------ ------------ Total assets $ 2,410,000 $ 2,557,000 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable and accrued liabilities $ 640,000 $ 773,000 ============ ============ Current portion of long term debt 49,000 82,000 Deferred revenue 399,000 412,000 ------------ ------------ Total current liabilities 1,088,000 1,267,000 ------------ ------------ Long term debt 16,000 28,000 ------------ ------------ Total liabilities 1,104,000 1,295,000 ------------ ------------ Stockholders' Equity: Preferred stock 300,000 300,000 Common stock 967,000 967,000 Paid-in capital 45,150,000 45,180,000 Accumulated deficit (45,275,000) (45,386,000) Foreign currency translation adjustment 164,000 201,000 ------------ ------------ Total stockholders' equity 1,306,000 1,262,000 ------------ ------------ Total liabilities and stockholders' equity $ 2,410,000 $ 2,557,000 ============ ============
3 4 OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
Three Months Ended June 30 ----------------------------- 1999 1998 ----------- ----------- Net Revenues: Products $ 1,104,000 $ 915,000 Services 267,000 459,000 ----------- ----------- Total net revenues 1,371,000 1,374,000 Costs and Expenses: Cost of product revenues 41,000 121,000 Cost of service revenues 54,000 101,000 Sales and marketing 530,000 579,000 Research and development 385,000 337,000 General and administrative 243,000 1,201,000 ----------- ----------- Total costs and expenses 1,253,000 2,339,000 ----------- ----------- Operating Income (Loss) 118,000 (965,000) ----------- ----------- Other Income (Expense): Interest income 3,000 2,000 Interest expense and other, net (6,000) (114,000) ----------- ----------- Total other income (expense) (3,000) (112,000) ----------- ----------- Income (loss) before Income Taxes 115,000 (1,077,000) Income Tax Expense 4,000 4,000 ----------- ----------- Net income (loss) $ 111,000 $(1,081,000) =========== =========== Net income (loss) per common share: $ 0.01 $ (0.51) Weighted average number of common shares outstanding 9,679,829 2,125,827
4 5 OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended June 30 --------------------------- 1999 1998 ---------- ------------ Cash Flows from Operating Activities: Net income (loss) $ 111,000 $ (1,081,000) Adjustments to reconcile net income (loss) to net cash used for operating activities: Depreciation and amortization expense 79,000 119,000 Loss on write-off of prepaid expense -- 500,000 Provision for inventory evaluation -- 50,000 Legal fees capitalized to stock issuance costs (29,000) -- Change in assets and liabilities: Trade accounts receivable (21,000) (113,000) Inventory -- 7,000 Loss on disposal of property 1,000 79,000 Other current assets 274,000 238,000 Accounts payable and accrued liabilities (133,000) (173,000) Deferred revenue (14,000) (114,000) ---------- ------------ Net cash provided by (used for) operating activities 268,000 (488,000) ---------- ------------ Cash Flows from Investing Activities: Purchases of property, furniture and equipment (42,000) (3,000) Proceeds from sale of fixed assets 1,000 16,000 ---------- ------------ Net cash provided by (used for) investing activities (41,000) 13,000 ---------- ------------ Cash Flows from Financing Activities: Net proceeds from preferred stock issuance -- 482,000 Repayments of debt (45,000) (127,000) ---------- ------------ Net cash provided by (used for) financing activities (45,000) 355,000 ---------- ------------ Effect of Exchange Rate Changes on Cash (21,000) 11,000 Net increase (decrease) in cash and equivalents 161,000 (110,000) Cash and equivalents at beginning of period 271,000 242,000 ---------- ------------ Cash and Equivalents at end of period $ 432,000 $ 132,000 ========== ============
5 6 OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. The unaudited financial information furnished herein reflects all adjustments, consisting only of normal recurring items, which in the opinion of management are necessary to fairly state the Company's financial position, the results of its operations and the changes in its financial position for the periods presented. These financial statements should be read in conjunction with the Company's audited financial statements for the year ended March 31, 1999. The results of operations for the period ended June 30, 1999 are not necessarily indicative of results to be expected for any other interim period or the fiscal year ending March 31, 2000. 2. The Company has adopted Statement of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128). SFAS 128 requires a dual presentation of basic and diluted EPS. Basic EPS excludes dilution and is computed by dividing net income (loss) by the weighted average of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities and other contracts to issue stock were exercised or converted into common stock, unless the effect of such securities would be anti-dilutive. 6 7 OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES THIS REPORT ON FORM 10-QSB INCLUDES A NUMBER OF FORWARD-LOOKING STATEMENTS THAT REFLECT THE COMPANY'S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND FINANCIAL PERFORMANCE. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES, INCLUDING THOSE DISCUSSED IN "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND THE COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM HISTORICAL OR ANTICIPATED RESULTS. ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This Item 2, as well as other portions of this document, include certain forward-looking statements about the Company's business, revenues, expenditures and operating and capital requirements. In addition, forward-looking statements may be included in various other Company documents to be issued concurrently or in the future and in oral or other statements made by representatives of the Company to investors and others from time to time. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from predicted results. Such risks include, among others - the Company's liquidity, - significant variability in operating results, including variability in product revenues and gross margins, - fluctuating demand for new and established products, - dependence on development of new products, - increasing expenses for marketing and development of new products, - historical lack of profitability, - rapid technological change that affects the ability of the Company to respond to customer or market demands, - risks associated with global operations, - the continued and future acceptance of the Company's products, - the rate of growth in the industries of the Company's products, - the presence of competitors with greater technical, marketing and financial resources, and - the ability of the Company to successfully expand its operations. Any of such statements and this discussion should be read in conjunction with the discussion of "Risk Factors" in this Item 2 and the Company's audited consolidated financial statements, 7 8 including the notes thereto, included in its annual report for the fiscal year ended March 31, 1999, on Form 10-KSB/A filed with the Commission on July 29, 1999. OVERVIEW The Company, through its domestic and international subsidiaries, develops and markets software application development tools and related technical services. Its main products are the OMNIS 7(3)(TM) client/server application development software group of products, and the more advanced OMNIS Studio(TM) rapid application development (RAD) tools. The Company markets its products primarily through its indirect channel consisting of VAR's, Distributors, and OEM relationships. The Company has operated at a loss for the last several years except the three quarters ending June 30, 1999. The Company's new management team has taken steps to improve the Company's cash flow through (i) more aggressive marketing of its products; (ii) focusing research and development expenditures on products that have a shorter return or "payback" period; (iii) improving operational efficiencies and (iv) significantly reducing operating expenses. With these improvements, the Company reduced cash used in operations from $6,180,000 in fiscal year 1998 to $2,514,000 in fiscal year 1999, the Company had positive cash flow provided by operating activities of $268,000 in the three months ended June 30, 1999 compared to negative cash flow used for operating activities of $488,000 in the three months ended June 30, 1998. The company also had a net profit of $111,000 in the three months ended June 30,1999. However, there can be no assurance that the Company will be able to sustain profitability in the near future or thereafter. While the Company is not currently seeking additional financing, there can be no assurance that the Company will be able to raise additional capital at any time in the future on commercially reasonable terms, or at all, should the need arise to fund future operations. If the Company is unsuccessful in raising capital when needed, the Company may be required to cease operations. 8 9 RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1999, AND JUNE 30, 1998 REVENUES Total net revenues for the three months ended June 30, 1999, were $1,371,000, representing a decrease of 0.2% as compared to total net revenues of $1,374,000 for the three months ended June 30, 1998. The change is due to a combination of the reduction in service revenues, particularly as a result of the Company's decision to reduce conflicts with some of its channel partners, and an increase in product revenues. Product revenues increased during the three months ended June 30, 1999, to $1,104,000 from $915,000 in the three months ended June 30, 1998. This increase is due to the Company's decision to concentrate on product-related revenue, rather than a mix of product and service revenue, over the past 18 months. During the three months ending June 30, 1999, product revenues represented 81% of total net revenues as compared to 67% of total net revenues during the same period in the prior year. Service revenues for the three months ended June 30, 1999 decreased 42% to $267,000 from $459,000 for the three months ended June 30, 1998. The majority of this decrease is due to the Company's decision to de-emphasize its consulting offerings over the past 18 months. Maintenance revenue, which primarily consists of fees from email and telephone support to the Company's customers, decreased slightly during the period ending June 30, 1999, due to the decrease in the annual support fees being charged to customers. The Company does not expect to receive significant service revenues related to consulting projects in future periods as it focuses on higher margin product related revenue and shifts consulting opportunities to its external partners. COST OF SALES Cost of product revenues is comprised of direct costs associated with software product sales including software packaging, documentation, and physical media costs. Cost of service revenues is comprised of customer support (maintenance) expenses, including technical support salaries and related expenses, and consulting related costs, including consultant salaries and related costs incurred in delivering customer consulting and training services. Cost of product revenues as a percentage of product revenues decreased from 13% in the three months ended June 30, 1998 to 4% in the three months ended June 30, 1999. Cost of product revenues for the three months ended June 30, 1998 includes a write-off for inventory obsolescence. 9 10 Cost of service revenues decreased slightly as a percentage of service revenues from 22% in the three months ended June 30, 1998, to 20% in the three months ended June 30, 1999. SALES AND MARKETING EXPENSE Sales and marketing expenses decreased to $530,000 for the three months ended June 30, 1999, as compared to $579,000 for the three months ended June 30, 1998. The decrease in sales and marketing expenses was primarily due to decreases in headcount in marketing and sales. The Company expects to increase its marketing expenses during future periods as it rebuilds its marketing efforts with partner focused programs designed to increase its installed base of customers. RESEARCH AND DEVELOPMENT EXPENSE Research and development costs increased to $385,000 for the three months ended June 30, 1999, as compared to $337,000 for the three months ended June 30, 1998, primarily due to an increase of headcount at the Research and Development Center of the Company in the United Kingdom. The Company continues to invest in the development of its newer product line, OMNIS Studio, aimed at sales opportunities that the Company believes will expand its installed base of customers. GENERAL AND ADMINISTRATIVE EXPENSE General and administrative expenses decreased to $243,000 for the three months ended June 30, 1999, as compared to $1,201,000 for the three months ended June 30, 1998. General and administrative expenses for the three months ended June 30, 1998 included a write-off of approximately $540,000 of the Company's lease deposit associated with the Company's former headquarters in San Bruno, California, as a result of its successful negotiation with its U.S. facility landlord to vacate its lease space. Additionally the Company recognized a write-off related to the disposal of leased equipment that resulted in a non-recurring charge of $110,000 during the quarter ended June 30, 1998. The Company is continuing its efforts to reduce its operating expenses where possible, including general and administrative expenses. OTHER INCOME (EXPENSE) Other income (expense) is comprised primarily of interest income earned on cash and cash equivalents, interest expense, and any gain or loss on foreign currency transactions. Interest income increased to $3,000 for the three months ended June 30, 1999, from $2,000 for the three months ended June 30, 1998, primarily due to higher average balances of cash and cash equivalents. Interest expense decreased to $3,000 for the three months ended June 30, 1999, from $37,000 for the three months ended June 30, 1998, primarily due to the conversion of a promissory note from the Company to a significant shareholder to equity stock in March 1999. 10 11 PROPERTIES During the initial part of fiscal year 1999 the Company had leased approximately 22,178 square feet of office space in San Bruno, California, under a lease which expired in May 2002 and required payment of base monthly rental payments of $58,772 plus a percentage of operating costs and property taxes. The base monthly rent increased to $60,990 per month during 1998. The Company negotiated a termination of this lease in August 1998 and now occupies 3,800 square feet of office space in San Carlos, California, under a lease which expires on August 31, 2000, and has a base monthly rent of $7,440. The Company owns property in the United Kingdom that it uses for research and development. The Company also leased 2,738 square feet of office space for the European sales headquarters office in Bracknell, England. The Bracknell lease, which expired in February 2001, had monthly rental payments of $4,997 plus $2,096 for common area maintenance. The Company has agreed an early termination of this lease with the landlord and moved on June 15, 1999 to new offices near Watford, England. This will result in substantial savings on rent and service charges over a full year. The Company also leases 2,370 square feet of office space (formerly its London sales office) in London, England. That lease, which expires on November 1, 2012, has monthly rental payments of $3,820. During the year, the Company sublet all of the London office space, for which it has been receiving a rental of $2,216 per month plus 100% reimbursement for common area maintenance. As a result of a sublease review, this has been increased to $3,820 per month, backdated to November 1997. The sublease terminates on December 25, 1999. The Company leases property in Germany for use as a sales office. The space is 457 square meters and has monthly rental payments of $6,678. The lease will expire May 14, 2007, with a Company option to terminate the lease in May 2002. The Company believes that these facilities are more than adequate to meet its requirements for fiscal year 2000. All of the foregoing rental obligations are in the local currency but for these purposes are stated in United States Dollars as of March 31, 1999. RISK FACTORS QUARTERLY FLUCTUATIONS The Company has experienced significant quarterly fluctuations in operating results and anticipates such fluctuations in the future. The Company generally ships orders as received and, as a result, typically has little or no backlog. Quarterly revenues and operating results, therefore, depend on the volume and timing of orders received during the quarter, which are difficult to forecast. Furthermore, the Company has typically sold to large corporate enterprises, significant customers, and distributors that often purchase in significant quantities, and therefore, the timing of the receipt of such orders could cause significant fluctuations in operating results. Historically, the Company has often recognized a substantial portion of its license revenues in the last month of the quarter. Service revenues tend to fluctuate as technical service projects, which may continue over several quarters, are undertaken or completed. Operating results may also fluctuate 11 12 due to factors such as the demand for the Company's products, the size and timing of customer orders, changes in the proportion of revenues attributable to licenses and service fees, commencement or conclusion of significant technical service projects, changes in pricing policies by the Company or its competitors, the number, timing, and significance of product enhancements and new product announcements by the Company and its competitors, the ability of the Company to develop, introduce, and market new and enhanced versions of the Company's products on a timely basis, changes in the level of operating expenses, changes in the Company's sales incentive plans, budgeting cycles of its customers, customer order deferrals in anticipation of enhancements or new products offered by the Company or its competitors, nonrenewal of maintenance agreements, product life cycles, software bugs and other product quality problems, personnel changes, changes in the Company's strategy, the level of international expansion, seasonal trends and general domestic and international economic and political conditions, among others. The development and introduction of new or enhanced products also requires the Company to manage the transition from older, displaced products in order to minimize disruptions in customer ordering patterns and excessive levels of older product inventory and to ensure that adequate supplies of new products can be delivered to meet customer demand. Because the Company is continuously engaged in this product development and transition process, its operating results may be subject to considerable fluctuations, particularly when measured on a quarterly basis. Accordingly, the Company believes that period-to-period comparisons of its operating results are not necessarily meaningful and should not be relied upon as indications of future performance. In addition, revenues in quarters after a new product release may be significantly affected by the amount of upgrade revenue, which tends to increase soon after the release of a new product and then decline rapidly. EXPENSE LEVELS The Company's expense levels are based, in significant part, on the Company's expectations as to future revenues and are therefore relatively fixed in the short term. If revenue levels fall below expectations, net income is likely to be disproportionately adversely affected because a proportionately smaller amount of the Company's expenses vary with its revenues. There can be no assurance that the Company will be able to achieve profitability on a quarterly or annual basis in the future. Due to all the foregoing factors, it is likely that in some future quarter the Company's operating results will be below the expectations of public market analysts and investors. In such event the price of the Company's common stock would likely be materially adversely affected. FUTURE OPERATING RESULTS The Company's future operating results will depend, to a considerable extent, on its ability to rapidly and continuously develop new products that offer its customers enhanced performance at competitive prices. Inherent in this process are a number of risks. The development of new, enhanced software products is a complex and uncertain process requiring 12 13 high levels of innovation from the Company's designers as well as accurate anticipation of customer and technical trends by the marketing staff. Once a product is developed, the Company must rapidly bring it into production in order to achieve acceptable product costs. The Company participates in a dynamic high technology industry and believes that changes in any of the following areas could have a material adverse effect on the Company's future financial position or results of operations: advances and trends in new technologies; competitive pressures in the form of new products or price reductions on current products; the volume, mix, and timing of orders; changes in product mix; changes in overall demand for products and services offered by the Company; changes in certain strategic partnerships or customer relationships; litigation or claims against the Company based on intellectual property, regulatory or other factors; risks associated with changes in domestic or international economic and/or political conditions or regulations either in the industries the Company serves or generally; and the Company's ability to attract and retain employees necessary to support growth. INTELLECTUAL PROPERTY PROTECTION The OMNIS products include technologies developed by the Company. The Company relies primarily on a combination of trade secret, copyright and trademark laws and contractual provisions to protect its proprietary rights in such technologies. There is no assurance that such laws and contractual provisions will adequately protect the intellectual properties and other proprietary rights of the Company. The Company is in the process of preparing appropriate patent applications for certain of its Studio Web Client and other technologies. At this time the Company has not filed any final patent applications and has not been granted any patents on any of its proprietary technologies and there is no assurance that any such patents will be granted. Patent protection may become important in the protection of the commercial viability of the Company's innovative products, and the failure to obtain such patent protection could have an adverse effect on the commercial viability of such products. The Company's success therefore may in part depend on its ability to obtain patent protection or licenses to patents in the future. It is not possible to anticipate the breadth or degree of protection that patents would afford any product of the Company or the underlying technologies. There can be no assurance that any patents issued or licensed to the Company will not be successfully challenged in the future or that any OMNIS product will not infringe the patents or other intellectual property rights of third parties. INTERNATIONAL OPERATIONS The Company operates on a global basis with offices or distributors in Europe and Asia as well as in North America. International operations are subject to inherent risks, including costs and difficulties in staffing and managing foreign operations; difficulties in obtaining and managing local distributors; the costs and difficulties in localizing products into languages other than English for foreign markets; political or economic instability, unexpected regulatory changes and fluctuations in interest or exchange rates in the specific countries in which the Company distributes its products or in international markets in general; longer receivables collection periods and greater difficulty in accounts receivable collection; import/export duties and quotas; reduced protection for intellectual property rights in some countries; and potentially 13 14 adverse tax consequences. Also, as the Company continues to operate more internationally, seasonality may become an increasing factor in its financial performance. There can be no assurance that these factors or any combination of these factors will not adversely affect the international revenues or overall financial performance of the Company. CHANGES IN PRICING STRUCTURE The Company has recently announced a reduction in certain portions of its pricing structure for fiscal year 1999 and beyond. There is no guarantee that this reduction in prices will lead to increased unit volume or other additional revenue streams to replace this lost revenue, which could lead to a significant cash flow strain on the core operations of the Company. Additionally, the Company is relying on increased revenues related to its new OMNIS Studio product line, which have not generated revenues as originally projected by the Company. There is no assurance that this product line will generate the revenues needed to sustain the Company in coming quarters and beyond. The Company has committed to decreasing sales conflicts with its partners particularly in the service revenue area and has already taken a number of steps in this regard. This has had and will continue to have a negative effect on service revenues as compared to previous quarters and years. There can be no guarantee that the Company will be able to replace the decreasing service revenues with new product revenues. YEAR 2000 Many existing computer programs use only two digits to define the applicable year in a date field. These programs were designed without considering the impact of the upcoming change in the century. If not corrected, many computer applications could fail or create erroneous results by or at the year 2000. Year 2000 compliance means that neither performance nor functionality of a computer system is affected by dates prior to, during or after the year 2000. In particular (i) no value for current date will cause any interruption in operation; (ii) date based functionality must operate consistently for dates prior to, during and after Year 2000; (iii) in all interfaces and data storage, the century in any date must be specified explicitly or by unambiguous algorithm or inferencing rules wherever possible; and (iv) Year 2000 must be recognized as a leap year. We only certify the latest versions of the OMNIS 7 and OMNIS Studio product lines, which are OMNIS 7(3) version 7.0 and above and OMNIS Studio 2.0 and above, as Year 2000 compliant as herein defined. All new versions of OMNIS products will be tested to ensure continued compliance. Earlier versions of OMNIS 7(3) and OMNIS Studio will store date data correctly, but may fail on some date calculations under certain circumstances, some of which involve the year 2000. OMNIS users have been advised of this issue, and the Company provides for the downloading of the latest version of the date functions applicable to the particular platform. Provided that developers use the current version of OMNIS 7(3) or OMNIS Studio in the manner designed, they will generate Year 2000 compliant OMNIS applications. It must be noted that both OMNIS Studio and OMNIS 7(3) provide a programming interface to other programs 14 15 and external functions written by external developers and can access data stored in remote databases. In all cases the date data passed to the remote database from the OMNIS storage contains the full 4 character year representation. However the Company cannot be responsible for compliance within individual applications written by external applications developers. The Company also does not accept any responsibility for Year 2000 compliance with respect to any hardware on which our products are used or any other software, including but not limited to operating system software, server databases, data file systems and other software utilities. We believe we have designed our current products to effectively handle the Year 2000 issue. The majority of our internal applications were built using OMNIS products which we believe are Year 2000 compliant. Therefore, we believe that it has substantially mitigated our risks on the Year 2000 issue with our internal applications. We are in the process of completing the testing and assessment of Year 2000 compliance for all third party hardware and software and non-information technology ("non IT") systems used by the Company. We expect to have such testing and assessment completed no later than October 31, 1999. We will upgrade or replace all third party hardware or software and non IT systems in use that are not compliant. We intend to establish, but have not yet established, a contingency plan detailing actions that will be taken in the event that any such upgrade or replacement is not compliant or that the assessment of the Year 2000 issue is not successfully completed on a timely basis. The internal costs of such Year 2000 compliance is not known at this time. We cannot assure that we are or will be fully Year 2000 compliant or that Year 2000 compliance issues will not arise with respect to products furnished by third party manufacturers, our own products, or suppliers that may result in unforeseen costs or delays to the Company and therefore have a material adverse effect on the Company. FORWARD LOOKING STATEMENTS The Private Securities Litigation Reform Act of 1995 contains certain safe harbors regarding forward-looking statements. From time to time information provided by the Company or statements made by its directors, officers or employees may contain "forward-looking" information subject to numerous risks and uncertainties. Any statements made herein that are not statements of historical fact are forward-looking statements including, but not limited to, statements concerning the characteristics and growth of the Company's markets or customers, the Company's objectives or plans for future operations and products and the Company's expected liquidity and capital resources. Such forward-looking statements are based on a number of assumptions and involve a number of risks and uncertainties, and therefore actual results could materially differ. These risks and uncertainties include, among others, the Company's continuing liquidity problems, significant variability in operating results, including variability in product revenues and gross margins, fluctuating demand for new and established products, dependence on development of new products, increasing expenses for marketing and development of new products, historical lack of profitability, rapid technological change that affects the ability of the Company to respond to customer or market demands, risks associated with global operations, the continued and future acceptance of the Company's products, the rate of growth in the industries of the Company's products, the presence of competitors with greater technical, marketing and financial resources, and the ability of the Company to successfully expand its operations. 15 16 LIQUIDITY AND CAPITAL RESOURCES At June 30, 1999, the Company's principal sources of liquidity consisted of cash and cash equivalents of $432,000, as compared to $132,000 at June 30, 1998. The Company's working capital position increased to $390,000 at March 31, 1999 and to $477,000 at June 30, 1999 from a deficit of $3,037,000 at June 30, 1998. The Company has operated at a loss for the last several years except the three quarters ending June 30, 1999. The Company's new management team has taken steps to improve the Company's cash flow through (i) more aggressive marketing of its products; (ii) focusing research and development expenditures on products that have a shorter return or "payback" period; (iii) improving operational efficiencies and (iv) significantly reducing operating expenses. With these improvements, the Company reduced cash used in operations from $6,180,000 in fiscal year 1998 to $2,514,000 in fiscal year 1999, the Company had positive cash flow provided by operating activities of $268,000 in the three months ended June 30, 1999 compared to negative cash flow used for operating activities of $488,000 in the three months ended June 30, 1998. The Company also had a net profit of $111,000 in the three months ended June 30, 1999. However, there can be no assurance that the Company will be able to sustain profitability in the near future or thereafter. In February 1998, the Nasdaq Stock Exchange de-listed the Company from the Nasdaq SmallCap Market. The Company is now traded on the Nasdaq Bulletin Board (BB). This has had a negative impact on the liquidity of the Company's outstanding common shares. It is not known at this time when or if the Company will be re-listed on the Nasdaq SmallCap Market. The Company does not currently have an established line of credit with a commercial bank. Such a credit facility may be difficult to obtain with the Company's historical operating results. Accordingly, in order to obtain additional funds in the future, the Company may need to seek additional equity capital which would be dilutive to current stockholders. The Company is not currently attempting to raise additional capital, but such activity may be required to continue operations. There can be no assurance that the Company will be able to raise additional capital on commercially reasonable terms should the Company need additional funds in the future. 16 17 OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Compass Actions. In March 1998, the Company was sued by Compass Software ("Compass") in the Federal District Court for the Eastern District of Washington claiming damages in the range of $2 Million for software copyright infringement and related claims. The Company believes that Compass' copyright infringement suit has no merit and has vigorously defended against those claims. In this connection the Company previously had sued Compass in 1994 for illegally infringing and distributing our software products. This matter was settled with an agreement that Compass would pay certain amounts and would not make illegal copies of the Company's software in the future. Compass failed to pay the promised amounts when due. The Company then obtained a judgment for breach of contract against Compass. As part of its efforts to enforce our judgment against Compass, the Company purchased, at a judgment lien sale, certain intangible property of Compass including the rights to the current infringement suit brought by Compass ("Execution Sale"). Compass then requested the applicable court to set aside the Execution Sale. The court granted the request and the Company has appealed this judgment. The appeal has been briefed and is awaiting a date for oral argument. The Company has also filed a separate lawsuit against Compass alleging additional acts of infringement related to the 1994 case. BTN - Germany. The Company entered into a professional development services agreement with BTN Versandhandel GmbH ("BTN") of Leiferde, Germany for the development of an OMNIS application. The Company developed and delivered a version of the application to BTN. BTN failed to pay the Company as agreed, claiming there were flaws in the application. The Company suspended the project awaiting BTN's payment. BTN commenced legal action against the Company in Germany claiming damages of approximately DM250,000 for failure to perform under the service agreement. The Company has countersued BTN claiming the balance owed under the contract of approximately DM60,000. The Company believes that the claim by BTN is meritless and intend to aggressively pursue its counterclaim against BTN. Creditors. As a result of the losses and negative cash flows incurred by the Company fiscal year 1998, the Company was unable to meet its obligations. The Company negotiated with a group of its creditors to structure a workout agreement pursuant to which we would repay the creditors over time, thereby possibly avoiding further litigation and collection activities or formal bankruptcy proceedings. The workout plan was agreed to by this group of creditors and was approved on June 19, 1998. The Company began repayment to customers in the quarter ending September 1998. The Company paid all amounts owed to all of these creditors in full by the end of March 1999. 17 18 ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits:
Exhibit Number Description - -------------- ----------- 3.1 Restated Certificate of Incorporation, as amended and corrected through February 9, 1999.(7) 3.2 Certificate of Amendment of Certificate of Incorporation dated February 9, 1999. (16) 3.3 Certificate of Designations dated March 31, 1998, as corrected.(7) 3.4 Certificate Regarding Series A Preferred Stock of the Omnis Technology Corporation dated February 25, 1999.(16) 3.5 Certificate of Designations dated March 31, 1999.(14) 3.6 Bylaws, as amended.(15) 10.1 Definitive Trust Deed dated October 26, 1983 among Blyth Holdings Limited, Blyth Software Limited and Geoffrey Paul Smith, Paul Nelson Wright and Suntrust Limited (relating to pension scheme).(1) 10.2 Service Agreement dated July 30, 1990 between OMNIS Technology Corporation and David Seaman.(2)
18 19 10.3 Deed of Guarantee dated June 1, 1993 between OMNIS Technology Corporation and A. Levy & Son Limited.(3) 10.4 Form of Subscription Agreement for purchase of Units of the Company's securities.(3) 10.5 Form of Stock Purchase Warrant sold to purchaser of Units of the Company's securities.(3) 10.6 Common Stock Purchase Agreement dated March 31, 1993 between OMNIS Technology Corporation and General Reinsurance Corp.(4) 10.7 Form of Indemnification Agreement entered into between the Company and all of its directors and certain of its officers.(4) 10.8 OMNIS Technology Corporation Amended and Restated 1987 Stock Option Plan, as amended.(4) 10.9 OMNIS Technology Corporation 1993 Directors' Warrant Plan and form of Director's Warrant.(9) 10.10 OMNIS Technology Corporation 1994 Employee Stock Purchase Plan, as amended.(10) 10.11 Registration Rights Agreement effective as of January 3, 1994, between the Company and Migration Software Systems Limited.(4) 10.12 Warrant to Purchase Shares of Common Stock dated January 3, 1994 granted to Migration Software Systems Limited.(4) 10.13 Warrant to Purchase Common Stock issued to Swartz Investments, Inc.(5) 10.14 Form of Registration Rights Agreement among the Company, Purchasers of 8% Convertible Debentures due March 31, 1997 and Swartz Investments, Inc.(5) 10.15 Form of Warrant to Purchase Common Stock issued to certain persons affiliated with Swartz Investments, LLC.(6) 10.16 Form of Registration Rights Agreement among the Company and Swartz Investments, LLC and its designees.(6) 10.17 Note Purchase Agreement dated as of October 14, 1997.(7) 10.18 Note Purchase Agreement dated as of October 31, 1997.(7) 10.19 Series A Convertible Preferred Stock Purchase Agreement dated as of April 1, 1998.(7) 10.20 Employee Agreement between the Company and Kevin Doyle dated April 1, 1998.(7) 10.21 Employee Agreement between the Company and Larry Barcot dated April 1, 1998.(7) 10.22 Shareholder Rights Agreement dated April 1, 1998.(7) 10.23 The 1996 Stock Plan and form of Option Agreement.(8)
19 20 10.24 The 1993 Advisors' Warrant Plan and form of warrant.(9) 10.25 Omnis Technology Corporation 1999 Stock Option Plan and form of Stock Option Agreement. (16) 10.26 Series A Convertible Preferred Stock Purchase Agreement dated December 31, 1998.(13) 10.27 Stock Purchase Agreement with Astoria Capital Partners, L.P. ("Astoria") dated March 31, 1999.(14) 10.28 Common Stock Purchase Agreement with Astoria dated March 31, 1999.(14) 10.29 Common Stock Purchase Agreement with Gwyneth Gibbs dated March 31, 1999.(14) 10.30 Common Stock Purchase Agreement with Philip and Debra Barrett Charitable Remainder Trust dated March 31, 1999.(14) 10.31 Common Stock Purchase Agreement with RCJ Capital Partners dated March 31, 1999.(14) 10.32 Common Stock Purchase Agreement with Rockport Group, L.P. dated March 31, 1999.(14) 16.1 Letter dated November 11, 1998 from Deloitte & Touche LLP to the Securities and Exchange Commission.(12) 21.1 Subsidiaries of the Company.(2) 23.1 Independent Auditors' Consent. (16) 23.2 Independent Auditors' Consent. (16) 27.1 Financial data schedule.
- ----------- (1) Incorporated by reference to the Annual Report on Form 10-K filed by the Company with the Commission on July 13, 1990. (2) Incorporated by reference to the Annual Report on Form 10-K filed by the Company with the Commission on June 28, 1991. (3) Incorporated by reference to the Annual Report on Form 10-K filed by the Company with the Commission on June 26, 1992. (4) Incorporated by reference to the Annual Report filed by the Company with the Commission on June 28, 1994. (5) Incorporated by reference to the Current Report on Form 8-K filed by the Company with the Commission on April 7, 1995. (6) Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1996. 20 21 (7) Incorporated by reference to the Current Report on Form 8-K filed by the Company with the Commission on June 16, 1998. (8) Incorporated herein by reference to the Registrant's Annual Report on Form 10-K, as amended, for the fiscal year ended March 31, 1997, filed by the Registrant with the Commission on July 29, 1997. (9) Incorporated herein by reference to the Registrant's Registration Statement on Form S-8 (Registration Number 33-81008) filed June 30, 1994. (10) Incorporated herein by reference to the Registrant's Registration Statement on Form S-8 (Registration Number 333-38449) filed October 22, 1997. (11) Incorporated by reference to the Current Report on Form 8-K filed by the Company with the Commission on March 19, 1998. (12) Incorporated by reference to the Current Report on Form 8-K filed by the Company with the Commission on November 12, 1998. (13) Incorporated by reference to the Current Report on Form 8-K filed by the Company with the Commission on January 15, 1999. (14) Incorporated by reference to the Current Report on Form 8-K filed by the Company with the Commission on April 5, 1999. (15) Incorporated herein by reference to the Annual Report on Form 10-KSB, as amended, for the fiscal year ended March 31, 1998, filed by the Company with the Commission on June 29, 1998. (16) Incorporated herein by reference to the Annual Report on Form 10-KSB, as amended by Form 10-KSB/A for the fiscal year ended March 31, 1999, filed by the Company with the Commission on July 29, 1999. (b) Reports were filed by the Company on Form 8-K during the last quarter of the period covered by this report as follows: FORM 8-K. On April 5, 1999, the Company filed a Form 8-K report regarding the Company entering into a stock purchase agreements with an affiliate of an existing shareholder and with certain members of the Board of Directors. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: August 16, 1999 OMNIS TECHNOLOGY CORPORATION (Registrant) /s/ Gwyneth Gibbs ---------------------------------------- Gwyneth Gibbs President, interim Chief Executive Officer, and interim Chief Financial Officer EXHIBIT INDEX
Exhibit Number Description - -------------- ----------- 3.1 Restated Certificate of Incorporation, as amended and corrected through February 9, 1999.(7) 3.2 Certificate of Amendment of Certificate of Incorporation dated February 9, 1999. (16) 3.3 Certificate of Designations dated March 31, 1998, as corrected.(7) 3.4 Certificate Regarding Series A Preferred Stock of the Omnis Technology Corporation dated February 25, 1999.(16) 3.5 Certificate of Designations dated March 31, 1999.(14) 3.6 Bylaws, as amended.(15) 10.1 Definitive Trust Deed dated October 26, 1983 among Blyth Holdings Limited, Blyth Software Limited and Geoffrey Paul Smith, Paul Nelson Wright and Suntrust Limited (relating to pension scheme).(1) 10.2 Service Agreement dated July 30, 1990 between OMNIS Technology Corporation and David Seaman.(2) 10.3 Deed of Guarantee dated June 1, 1993 between OMNIS Technology Corporation and A. Levy & Son Limited.(3) 10.4 Form of Subscription Agreement for purchase of Units of the Company's securities.(3) 10.5 Form of Stock Purchase Warrant sold to purchaser of Units of the Company's securities.(3) 10.6 Common Stock Purchase Agreement dated March 31, 1993 between OMNIS Technology Corporation and General Reinsurance Corp.(4) 10.7 Form of Indemnification Agreement entered into between the Company and all of its directors and certain of its officers.(4) 10.8 OMNIS Technology Corporation Amended and Restated 1987 Stock Option Plan, as amended.(4) 10.9 OMNIS Technology Corporation 1993 Directors' Warrant Plan and form of Director's Warrant.(9) 10.10 OMNIS Technology Corporation 1994 Employee Stock Purchase Plan, as amended.(10) 10.11 Registration Rights Agreement effective as of January 3, 1994, between the Company and Migration Software Systems Limited.(4) 10.12 Warrant to Purchase Shares of Common Stock dated January 3, 1994 granted to Migration Software Systems Limited.(4) 10.13 Warrant to Purchase Common Stock issued to Swartz Investments, Inc.(5) 10.14 Form of Registration Rights Agreement among the Company, Purchasers of 8% Convertible Debentures due March 31, 1997 and Swartz Investments, Inc.(5) 10.15 Form of Warrant to Purchase Common Stock issued to certain persons affiliated with Swartz Investments, LLC.(6) 10.16 Form of Registration Rights Agreement among the Company and Swartz Investments, LLC and its designees.(6) 10.17 Note Purchase Agreement dated as of October 14, 1997.(7) 10.18 Note Purchase Agreement dated as of October 31, 1997.(7) 10.19 Series A Convertible Preferred Stock Purchase Agreement dated as of April 1, 1998.(7) 10.20 Employee Agreement between the Company and Kevin Doyle dated April 1, 1998.(7) 10.21 Employee Agreement between the Company and Larry Barcot dated April 1, 1998.(7) 10.22 Shareholder Rights Agreement dated April 1, 1998.(7) 10.23 The 1996 Stock Plan and form of Option Agreement.(8) 10.24 The 1993 Advisors' Warrant Plan and form of warrant.(9) 10.25 Omnis Technology Corporation 1999 Stock Option Plan and form of Stock Option Agreement. (16) 10.26 Series A Convertible Preferred Stock Purchase Agreement dated December 31, 1998.(13) 10.27 Stock Purchase Agreement with Astoria Capital Partners, L.P. ("Astoria") dated March 31, 1999.(14) 10.28 Common Stock Purchase Agreement with Astoria dated March 31, 1999.(14) 10.29 Common Stock Purchase Agreement with Gwyneth Gibbs dated March 31, 1999.(14) 10.30 Common Stock Purchase Agreement with Philip and Debra Barrett Charitable Remainder Trust dated March 31, 1999.(14) 10.31 Common Stock Purchase Agreement with RCJ Capital Partners dated March 31, 1999.(14) 10.32 Common Stock Purchase Agreement with Rockport Group, L.P. dated March 31, 1999.(14) 16.1 Letter dated November 11, 1998 from Deloitte & Touche LLP to the Securities and Exchange Commission.(12) 21.1 Subsidiaries of the Company.(2) 23.1 Independent Auditors' Consent. (16) 23.2 Independent Auditors' Consent. (16) 27.1 Financial data schedule.
- ----------- (1) Incorporated by reference to the Annual Report on Form 10-K filed by the Company with the Commission on July 13, 1990. (2) Incorporated by reference to the Annual Report on Form 10-K filed by the Company with the Commission on June 28, 1991. (3) Incorporated by reference to the Annual Report on Form 10-K filed by the Company with the Commission on June 26, 1992. (4) Incorporated by reference to the Annual Report filed by the Company with the Commission on June 28, 1994. (5) Incorporated by reference to the Current Report on Form 8-K filed by the Company with the Commission on April 7, 1995. (6) Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1996. (7) Incorporated by reference to the Current Report on Form 8-K filed by the Company with the Commission on June 16, 1998. (8) Incorporated herein by reference to the Registrant's Annual Report on Form 10-K, as amended, for the fiscal year ended March 31, 1997, filed by the Registrant with the Commission on July 29, 1997. (9) Incorporated herein by reference to the Registrant's Registration Statement on Form S-8 (Registration Number 33-81008) filed June 30, 1994. (10) Incorporated herein by reference to the Registrant's Registration Statement on Form S-8 (Registration Number 333-38449) filed October 22, 1997. (11) Incorporated by reference to the Current Report on Form 8-K filed by the Company with the Commission on March 19, 1998. (12) Incorporated by reference to the Current Report on Form 8-K filed by the Company with the Commission on November 12, 1998. (13) Incorporated by reference to the Current Report on Form 8-K filed by the Company with the Commission on January 15, 1999. (14) Incorporated by reference to the Current Report on Form 8-K filed by the Company with the Commission on April 5, 1999. (15) Incorporated herein by reference to the Annual Report on Form 10-KSB, as amended, for the fiscal year ended March 31, 1998, filed by the Company with the Commission on June 29, 1998. (16) Incorporated herein by reference to the Annual Report on Form 10-KSB, as amended by Form 10-KSB/A for the fiscal year ended March 31, 1999, filed by the Company with the Commission on July 29, 1999. 21 EX-27.1 2 FINANCIAL DATA SCHEDULE
5 3-MOS MAR-31-1999 APR-01-1999 JUL-30-1999 432,000 0 786,000 0 12,000 335,000 835,000 79,000 2,410,000 1,088,000 0 0 300,000 9,679,829 39,000 2,410,000 0 1,371,000 95,000 1,253,000 3,000 0 (3,000) 115,000 4,000 111,000 0 0 0 111,000 0.01 0.01
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